Do you realize that we once had a 94% marginal tax rate on the rich?

[LAGC]

http://www.truthandpolitics.org/top-rates.php

Taxes on the rich haven't been this consistently low since the "Roaring 1920's" that ushered in the Great Depression.

During the final years of World War 2 (1944 and 1945) we weren't afraid to make the rich pay their fair share. That rate was lowered somewhat after the war ended, but ramped back up to 91% between the years of 1951 and 1963 to help pay down the national debt, which was higher (as a ratio of debt-to-GDP) than it even is today:



Why is it that even Republican Administrations back then saw the merit of taxing the rich to pay down the debt, yet today we can't even get Democrats to all agree on raising taxes on the rich to reign in this out-of-control debt monster? Have we really moved that far to the right as a country?

I mean, take that "dark decade" of the 1950's with its "high" marginal tax rate on the rich... the middle-class blossomed, where one breadwinner in a household was all that was necessary to eke out a middle-class existence. Unions were strong and wages were good.

Can we ever return to those glory days (minus the McCarthyism)?

[BzaDem]

1. That datum is very misleading. The effective tax rate on the rich was nowhere near that amount.

There were many, many loopholes back then that allowed the rich to pay very little taxes compared to the official marginal rate. As they lowered the marginal rate over the years, they closed loopholes. All in all, the total amount brought in by taxation remained very stable.

In fact, as a percentage of GDP, we brought more in taxes in during 2006 than we brought in on average during the Eisenhower administration (when the official "marginal rate" was 90+ percent).

[LAGC]

2. Well, the solution seems simple then.

Close the loopholes and raise the marginal tax rate on the rich.

Best of both worlds.

[BzaDem]

4. I'm just pointing out that there is no comparison with tax rates decades ago. n/t

[LAGC]

6. What do you think would happen if...

We re-instituted a 94% marginal tax rate on the rich, yet closed the loopholes?

[BzaDem]

9. We would never collect 94%.

We could even set the rate at 1000%, but that doesn't mean we will collect anywhere near 1000%. Greece has very high tax rates, but very low tax revenues. While Art Laffer was obviously full of it when he claimed cutting rates a few percent would increase revenue, it is obvious (and basically undisputed by economists) that a 94% rate would produce lower revenues than, say, an 80% rate (which in turn would produce lower revenues than certain rates lower than that, etc).

If you want to maximize tax revenues brought in as a percentage of GDP, you should probably look towards Europe.

[LAGC]

10. That's a good point.

I'm sure there's some "sweet spot" much higher than we have now, but not necessarily quite so high as to cause massive evasion.

We should look towards Europe as an example.

[pipoman]

15. Really? Europe?

Like France? 10% unemployment Greece? 11% Granted the US is around 9.5% right now, but most of the European states are static, while the US fluctuates and is now hovering at the highest end of our historical UE rate. I am not a fan of modeling after Europe in most cases. That said, I do think we should re-evaluate our tax code and close loopholes which only the rich can exploit.

[BzaDem]

28. I never said anything about whether we should model Europe. I simply said that if you want to

maximize tax revenue, Europe does a better job than we do.

Of course, most people (including myself) do not want to single-mindedly maximize tax revenues at the expense of everything else (such as unemployment). You bring up unemployment, and that is a good point (though I would argue that it has less to do with taxes and more to do with other economic policies which are often country-specific). But we can certainly have a more progressive tax system in this country that brings in more revenue without harming unemployment significantly if at all.

[dotymed]

29. I think Europe, esp. Germany

is an excellent model. Besides their tax code they have universal health care, strong Unions, good paid vacations, and an economy that consistently competes with china (and their slave wages).

[Go2Peace]

36. European economies are not that weak. That is PROPAGANDA

and the dollar is higher because the world market is manipulated and we have a lot of power yet to twist arms. If it were only economics in play our dollar would be worth very little considering that we produce far less than we spend and live off of loans from other countries. The world economy right now is a fair bit a ponzi scheme, and we were fortunate to be some of the first and are still prospering by the fact we were at the top of the pyramid.

[NoNothing]

20. Historically, federal revenues as a % of GDP in the U.S.

Have basically never exceeded 20%, regardless of the tax *rates*. A.k.a. Hauser's Law.

[LAGC]

35. Yeah, but what about the tax burden?

Even if raising the marginal rate on the rich is "revenue neutral", at least it shifts the burden from off of the lower classes to where it belongs, and gives the rich incentive to invest the money in job creation write-offs rather than just horde it all and face the tax man.

[ThomThom]

25. We should raise the rate and provide tax breaks for things the benefit us

In essence loop holes for say job creation, environmental stewardship, and responsible management
Right now most multi-national companies pay no tax what so ever and the corporations have no incentive to put money out to raise workers pay or even provide Americans with jobs.

[pipoman]

38. I don't disagree with that...

it is always easy for people to say, 'raise taxes on the rich'. I am not rich, but certainly realize that the way our economy is now, if we try to over do it, the rich will find ways around paying through investment in economies which tax less...like anything else, there is competition in taxation of wealth..if our taxation is unreasonably high, just watch how long it takes for another economy to welcome them in with a lower tax rate. I like the basic idea you suggest.

[newspeak]

27. actually some tax loopholes or breaks could be for our benefit

tax breaks to hire locally, for new innovations, and positive investments. Raise the taxes and give breaks for positive growth and helping the american infrastructure. Incentives for investing where it counts, and that is not tax breaks for overseas activity.

[BlueCheese]

33. Nobody would get paid that much.

Nobody would earn more than X dollars a year if the government was taking 94% of their income above that. It'd essentially become a maximum wage.

[safeinOhio]

14. The high rates did force

the wealthy to "reinvest" the high income or have it subject to the tax. Those loop holes, as you guys are calling them, were very effective in building the greatest industrial country in the world in the 40s and 50s, along with a 50% duty on all imports.

In the 20s and 90s the low taxes on the ultra wealthy allowed them to gamble more with the extra money causing bubbles.

We need to look at the whole story. Of course, few if any really paid that percentage in tax. Most did reinvest and that lead to growth.

[Fumesucker]

8. On GD right now: Richest lawmakers grew wealthier as economy faltered

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9061188

According to this article from 2009 http://www.cbsnews.com/8301-503544_162-5553408-503544.h... there are 237 millionaires in congress, or 44% if that body as compared to only 1% of the rest of the country.

Are you incapable of connecting the class warfare dots?

Congress is 44% millionaires and millionaires just *happen* to be getting richer while everyone else suffers.

There are none so blind as those who will not see.

[Tesha]

13. We "brought in more taxes" because inflation shifted far more people...

...into ever-higher tax brackets.

Tesha

[TBF]

22. There are many loopholes now as well.

I'd like to see the cite that backs up the claim that we brought more in taxes in during 2006 than during the Eisenhower administration.

[unblock]

24. just calling the ways to avoid high taxes "loopholes" is also misleading

congress used the tax code to legislate all manner of tinkering with the economy. the offered credits and deductions for certain investments, steering the private sector to improve the economy in ways congress wanted. some of the loopholes were (or became) pointless and obsolete, and of course those were eventually used as the poster child examples for getting rid of this concept and just lowering the tax rate.

but it's fundamentally very different having our present system of (comparatively) few deductions and credits and low marginal rates vs. the old system of many deductions and credits and high credits, even if they were to collect exactly the same revenue by whatever metric you care to use. the present system gives congress no particular ability to steer the economy via the tax code; the old system did.

maybe that's a good thing, maybe not, but it is a big difference.

[baldguy]

3. And aren't to Republicans trying to restore the '50s?

[LAGC]

5. Only the bad parts. (n/t)

[ejpoeta]

7. the 50s where blacks knew their place and women were chained to the stove?

with a dress on? and no birth control? that 50s?

[gkhouston]

18. no, the 1850's where the blacks where chained, period. n/t

[baldguy]

30. Oh, yes. The "Good Old Days".

[Stinky The Clown]

11. Yes, it was the "normal" in all my formative and early adult years

[Scuba]

12. I recommend we tax and tax them until they are only "fabulously wealthy".

[bvar22]

16. During those years,

A Blue Collar Worker could:

* Provide for a family in relative comfort with one parent working

* Provide good Health Care for the family

* Buy a comfortable home, and pay it off in 20 years.

* Buy a new American car every few years

* Take a REAL vacation every year (two weeks only)

* Send his children to a State University

* Save enough to retire in comfort and dignity


A student could attend a State University and graduate DEBT FREE if willing to work a part time job.

If the Working Class & The Poor had a Political Party that represented THEM, we could have all those things again,
only THIS time, those Economic Conditions could extend over the Racial and Gender barriers of the past.

You can have those things if you want them.
The 50s & 60s proved it was possible to have a thriving and expanding Working Class, AND some people STILL got very RICH. High Taxes on The RICH did NOT stifle Economic Growth...in fact it BOOMED.

When the Working Class & The Poor realize we have more in common with each other than we have in common with the Rich Elite Leadership of BOTH Political Parties, "CHANGE" will be possible.


"There are forces within the Democratic Party who want us to sound like kinder, gentler Republicans. I want us to compete for that great mass of voters that want a party that will stand up for working Americans, family farmers, and people who haven't felt the benefits of the economic upturn."---Paul Wellstone


K&R

[TBF]

23. "Working Class"

Your comment "When the Working Class & The Poor realize we have more in common with each other than we have in common with the Rich Elite Leadership of BOTH Political Parties, "CHANGE" will be possible." This is really important.

There are folks who sit in a cubicle, own a tidy home in the suburbs, and make under $100K a year - and think they are rich. They identify as "well off" because that is the cool thing to be. Labor is uncool - people who wear uniforms to go to work or spend their time mowing lawns or fixing the plumbing - that is what they associate with "labor".

Critically important... until young executives buried in school loans realize they may have a good salary (but lose it all tomorrow if that salary ceases - which is happening to many these days) but are still "workers" in reality, we will not get there.

The "rich" (aka Owners) are people who have wealth (ie they can live quite comfortably for years if they have to without a paycheck). Much of this is inherited, but not always. We have new wealthy who lucked into Google stock options early on and the like ... This type of wealth is a very different ballgame than the "professional class" who thinks they are wealthy because they managed to negotiate a good salary/benefits package and drive around in a Lexus SUV. Really important distinction, and we "workers" of all types need to stick together.

Solidarity, friends.

[dotymed]

17. This was a "point of pride"

for many of the wealthiest Americans.
They bragged (some bitched) about the contributions they made to society.
It used to be a commonly recognized truth : "along with great power (wealth), comes great responsibilities."
Greed has definitely changed that mantra.
The "titans of industry" in the 21st century believe, and are backed up by LAW, that the main responsibility of any company is to create profits for their shareholders. The results on an economy (PEOPLE) doesn't even figure into it.
This "law" (excuse), has made these greedy bastards more shortsighted than ever.
It makes me wonder, do they know the world is ending soon? Because, they could realize much more profits by treating their employees and this economy as a sustainable resource.
If the workers are paid well (strong Unions) and have good benefits, then you have an economy (made up of flesh and blood people)that can afford to buy your goods. you have happy employees = more productivity. You make profits, but not at the rate that destroys your market. It's as if these "captains" are "in it" for the short haul, and they are. Current business models are not based on sustainability. They are grab the money and go practices.
This, as much as anything else, has shaped our worldwide economy into "profit at any cost", "cut off your nose to spite your face", philosophy. Much of these practices have come from the examples set by OUR fed. and world bank.
"Drain the populace, line your pockets, and then force austerity measures on the people and run to the next spot of exploitation."
Our CIA used to use these tactics on (usually 3rd world) markets that they wanted to destroy so that they could implement "capitalism and democracy (lol) on these countries.
Well, "they" have run out of 3rd world countries (of course, they financially destroyed them), and now it has been going on in America for the last 30 years. We are nearly financially destroyed (except that 1-2%). Of course the CIA used their "economic hitmen" to destroy these countries, but the financial bonanza went to "private companies." After the 3rd world economies were shattered, these companies were not about to stop these quick and deadly profit tactics. They came full circle and have nearly devoured their host, just like parasites do.
Henry Ford was a union-hating, profit driven S.O.B., even he realized that you have to pay your employees well and allow them to have benefits (healthy consumers) if you want to have a sustainable market to sell your goods.
Is there an optometrist in the house? short-sightedness has become an epidemic among the "captains of industry."

[Statistical]

19. While tax rates should be higher as other has pointed out nobody (not a single person) paid 94%.

Personally I would be for removing all exemptions and deductions. Yes every single one.

It makes the tax code overly complex and requires higher rates (to offset the lower income that is taxable).

Simple have a progressive tax system with no deductions or exemptions.

Something like (for single)
First $40,000 = tax free
Next $20,000 = 10% tax
Next $50,000 = 15% tax
Next $100,000 = 25% tax
Next $250,000 = 40% tax
Next $1 mil = 49% tax
Next $10 mil = 60% tax
Next $50 mil = 70% tax
Above that = 75% tax

You could figure out your taxes owed in about 5 minutes with a hand calculator and the form would be one page long.

[RUMMYisFROSTED]

40. It would be interesting to see what revenues would be under that tax system.

80%(?) of the country would be paying under 10%. The additional disposable income would undoubtedly fire the economy.
Dividends would have to be treated the same as salary and would add a ton of money.
I agree with the basic outline of your plan (and proposed similar here years ago) but it was difficult to calculate revenues.

[MineralMan]

21. But that was in the "good old days" the wingers keep talking

about. I never miss an opportunity to point that out.

[slackmaster]

32. People who earned over $5,000 in 1945 were regarded as affluent

My grandparents barely made $2,500 even with my grandfather's Navy allotment checks.

[Catherina]

26. And, unlike the rest of us, they didn't starve did they? Raise back the taxes!

[slackmaster]

31. How about some data on how many people actually earned > $200K and paid that rate?

I doubt that it affected more than a few dozen tax returns in 1944 and 1945. According to http://www.dollartimes.com/calculators/inflation.htm, $200,000.00 in 1945 had the same buying power as $2,426,393.26 in 2010.

Here's some data from the US Census Bureau concerning income in 1945.

http://www2.census.gov/prod2/popscan/p60-002.pdf

"About 1 out of 4 families and individuals had total money income above $3,500 in 1945. The median for all families and individuals was $2,379."

According to Table 1 on page 11, 1.3% of families and individuals reported income of $10,000 or higher.

[rateyes]

34. And, if we raised it back,

you would see unemployment disappear, because the rich could hire people for 6 cents on the dollar...which they would do rather than pay it to the government. You would also see charitable giving skyrocket in this country.

Raising the top rate to 90%+ is a very good idea for the country. And as far as Social Security is concerned...just lift the cap....problem solved.

[Norrin Radd]

37. kr

[ItNerd4life]

39. Why the misleading graph and misrepresentation of the facts?

There were few who earned that and nobody paid that rate. They had deductions for everything.
The actual tax rate they paid is less than todays actual rates, or did you not listen to Bill Clinton?